VIR - Alnylam Pharmaceuticals Starts 2023 With In-Line Revenue And A Full Slate Of Clinical Read-Outs

Summary

• Alnylam's fourth quarter product revenue was more or less as expected, with a faster/better-than-expected pace of switching between Onpattro and Amvuttra and further patient growth in Oxlumo and Givlaari.
• Investors will have multiple clinical read-outs to anticipate this year, including Phase I results from ALN-APP (Alzheimer's) and Phase II results from the zilebesiran hypertension program.
• Strong performance has taken up some of the upside I've seen in Alnylam shares, but clinical read-outs and regulatory decisions in 2023 could still add value from here.

This will be another busy year for Alnylam Pharmaceuticals ( ALNY ), as this leading RNAi biotech expects to release clinical updates on five different clinical programs, in addition to anticipated updates from partnered programs and multiple potential IND filings. Though the company has a relatively thin late-stage pipeline, positive early-stage updates from programs with large addressable markets could be enough to maintain a positive level of investor enthusiasm.

Alnylam shares have continued to outperform since my last update , besting the SPDR S&P Biotech ETF ( XBI ) by about 10%. Some minor adjustments to my model take my fair value above $240, and while that isn’t especially robust return potential given the risks with biotech investing, I would note that clinical and regulatory milestones during the year could meaningfully add to that fair value. Still, I would characterize today’s price more as “good, not great”, even though I am a big believer in the company and its core technologies.

In-Line Results Won’t Really Excite Anybody

Prior to its presentation at the annual J.P. Morgan Healthcare Conference, Alnylam gave investors an early look at fourth quarter revenue results, and those results were okay.

Overall product revenue was just a bit ahead of expectations, with $262M in product revenue just beating the average sell-side estimate of $260M. The TTR franchise (the main value-driver for the business), generated $191M in revenue, just ahead of the $187M average sell-side target and up 37% year over year. Amvuttra outperformed ($69M versus around $40M expected), while Onpattro came up a little short ($122M versus $147M).

Given the dynamics of patient switching between Onpattro and Amvuttra, I don’t think there’s much to read into this other than a faster switchover process, which could indicate that physicians and patients do see real value in the better administration profile of Amvuttra (every three months instead of every three weeks, and no need for steroids).

Givlaari sales rose about 15% to $47M, missing expectations by $4M, while Oxlumo sales rose 26% year over year and beat expectations by $4M. As a reminder, both of these drugs treat rare, under-diagnosed conditions and patient identification and treatment will be a multiyear process. To that end, the number of patients on Givlaari grew almost 50% yoy, while the number of patients on Oxlumo roughly doubled.

2023 Should Be Another Busy Year

Alnylam investors should have a lot to chew on in 2023, as the company will be reporting clinical results from multiple programs, as well as seeing the results reported on partnered programs.

Within the next few months, investors should see data on biannual dosing for Amvuttra and Phase I top-line data on ALN-APP in early-onset Alzheimer’s disease, as well as the initiation of Phase I studies for ALN-KHK in Type 2 diabetes and the completion of enrollment in the KARDIA-2 study of zilebesiran in hypertension.

Management indicated that they intend to move quickly with an sNDA filing if the Q6M data from Amvuttra are positive, and experience with Onpattro switchovers would suggest that twice-yearly dosing would be popular with patients.

With ALN-AAP, it’s hard to know how much data investors will get, though the company has said they plan to announce safety, tolerability, target engagement and biomarker data. The company has done biomarker validation work on AAP, but it remains to be seen how those biomarkers translate into real-world benefits, and this study isn’t powered to show those benefits. Still, given a mechanism of action that works upstream of current antibodies targeting amyloid-beta, it’s a potentially exciting program, and at a minimum I would expect investors to be keenly interested in how this first extra-hepatic RNAi treatment from Alnylam performs.

Around midyear the company should release top-line results from the KARDIA-1 Phase II study of zilebesiran as a monotherapy in mild-to-moderate hypertension. Early studies suggest that 20mmHG or more of improvement could be possible, and it is likewise possible that the drug can be effective with Q6M dosing – a non-trivial detail in a market where patient compliance has traditionally been an issue.

Later in 2023, Alnylam should see the FDA approval of its sNDA for Onpattro in ATTR-cardiomyopathy. It’s unclear at this point if the FDA will require an AdComm, but I certainly wouldn’t discount the possibility. While the potential for Onpattro in ATTR-CM is likely limited to patients who progress on Pfizer ’s ( PFE ) tafamadis, it’s still a starting point for the company’s expansion into ATTR-CM, a key part of the market that likely still remains underdiagnosed (some opinion leaders have suggested that 20%-25% or more of people with heart failure with preserved ejection fraction could have cardiac amyloidosis).

Late 2023 should also see Phase I results from the company’s ALN-TTRsc04 formulation. This drug is important to Alnylam because not only does it not carry any royalties to Sanofi ( SNY ), it could be administered once a year; a dosing schedule that would mitigate at least some of the risk to the program from non-reversible gene therapies for ATTR.

Management is also expecting to have top-line data from the KARDIA-2 study by year-end. A phase II combo study of zilebesiran in hypertension, the drug probably needs to show more than the 5-10mmHG improvement management has discussed to really get investors excited about the drug in 2024.

Alnylam also expects to have top-line data from the Phase I study of ALN-KHK in diabetes by year-end, and the company intends to file 2-4 new INDs before year-end.

Partnered Programs

Outside of Alnylam-controlled programs, investors should expect to see Phase II results from ALN-HBV02 in HBV (partnered with Vir Biotechnology ( VIR )) early in the year, as well as the start of Phase I studies of ALN-PNP (partnered with Regeneron ( REGN )) in NASH. Later in the year, investors should see Phase II data on ALN-HBV02 in HDV infections, as well as top-line results from the ATLAS Phase III study of fitusiran in hemophilia (with Sanofi).

Plenty Of Questions Remain

Alnylam has accomplished a lot in recent years, but that doesn’t mean the company (or stock) is in the clear at this point. With the Onpattro sNDA filing, for instance, there’s still debate as to the validity of the 6MWT endpoint and what that really means for clinical uptake. Likewise, a lot is still riding on the Phase III study of Amvuttra in ATTR-CM (HELIOS-B), as ATTR-CM is a major part of the overall addressable TTR market for the company.

On top of that there will be periodic concerns about the threat posed by gene therapies targeting ATTR. I believe Alnylam has set a high bar for efficacy and safety (and both safety and durability of efficacy have proven to be challenges for some gene therapies), but the fact remains that attractive markets attract competition.

It’s also worth noting that, while Alnylam has an above-average record of clinical success (helped by the company’s extensive use of biomarkers to validate drug candidates), it is not a flawless record. The company discontinued its ALN-XDH therapy for gout, as management concluded from initial results in Phase I that it would not be a “transformational” therapy. The future of cemdisiran is also in doubt – despite encouraging Phase II results, Regeneron has opted out of future development for the drug as a monotherapy for IgA nephropathy, though it remains in development as a combo therapy with pozelimab.

Beyond this, there are still ongoing questions about whether Alnylam can successfully treat targets outside of the liver. ALN-APP could be an important validation of the company’s ability to reach CNS targets, but expanding the deliverability of the company’s therapies beyond the liver is an important long-term driver.

The Outlook

Relative to my prior expectations, I’ve made some modeling adjustments to account for greater uncertainty around the cemdisiran program and improved uptake of Amvuttra. The abandonment of the gout program has no explicit impact on my model, as I don’t typically assign much value for compounds before Phase I results are in hand.

The TTR franchise continues to drive more than half of the value I see in Alnylam shares (around $140 out of $240). In the case of both polyneuropathy and cardiomyopathy, I assume that Alnylam’s therapies are “one out of many”, meaning that I model around 20%-25% market share and explicitly expect other treatments to generate revenue in the space as well. To that end, it is possible that there is upside here both from accelerated patient identification/treatment as well as better real-world market share.

Givlaari is the second-largest individual driver of value (around $30/share), and that’s based on the company reaching around 1,700 patients on the drug by mid-2028. Zilebesiran and ALN-AAP are perhaps the biggest wildcards in terms of valuation, as strong efficacy data could support significant long-term commercial opportunities, but it will take time to get there. ALN-KHK could likewise become a large-potential drug given the sheer size of the Type 2 diabetes market.

The Bottom Line

Typically I wouldn’t say that 10% upside is all that compelling for a biotech stock, even one with a strong track record like Alnylam. I do believe clinical read-outs in 2023 could add to the fair value, but time will tell if the data are good enough. As things stand today, I am still a big believer in Alnylam’s core technology and its pipeline productivity, and that keeps me leaning positive, but I can understand why investors may hold off in pursuit of better upside here or elsewhere.

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